Buyers vie for upmarket LA homes

Investors are back in the market for multimillion-dollar houses.
Photo: Reuters

by
Nadja Brandt

A week after Christine Lynch listed her house in the Brentwood neighbourhood of Los Angeles for $US3.63 million, she had seven offers. Within 10 days, a deal was reached for the five-bedroom, six-bathroom home at $US225,000 more than she asked.

“My first reaction was, ‘Wow, I guess we’re really doing this’," Ms Lynch, 55, said. The all-cash transaction was completed on April 23. “I was really surprised by this level of interest and how quickly it sold."

Bidding wars are breaking out for luxury homes in such wealthy Los Angeles enclaves as Brentwood, Beverly Hills and Bel Air as an increasing number of buyers bet on rising home prices and investors return to the market. Even properties needing extensive renovations are being fought over by buyers who expect to resell them for more after a remodel or rebuild.

“The percentage of people who think prices are only going to go up is the greatest I have ever seen in my career," said Syd Leibovitch, who is president of Rodeo Realty in Beverly Hills.

Sales of Beverly Hills homes priced at $US2 million and higher climbed 11 per cent to 39 in the first quarter from a year earlier, according to DataQuick, a San Diego-based research group. In Brentwood, whose residents include actress and singer
Julie Andrews
, they increased 56 per cent to 25, and in Malibu they gained 64 per cent to 23.

Throughout the US, residential property sales of $US1 million and higher rose 7.2 per cent in March, the most recent month for which figures are available, from a year earlier, said the Chicago-based National Association of Realtors, whose price categories stop at that amount.

Demand has been rising for high-end homes in the north-eastern US, including Boston and New York; on the California coast; and in parts of the southern US amid a recovery in financial markets, according to Paul Bishop, vice-president of research at the Realtors group.

In Brentwood and Beverly Hills, homes usually start between $US2.8 million and $US3.2 million for those on smaller lots in low-lying areas, and can go as high as $US20 million for larger plots, according to John Gould, manager of Rodeo Realty’s Beverly Hills office. Properties in hillier areas, which are usually larger and have views, tend to range from $US5 million to $US75 million.

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In the Los Angeles area, multiple offers have reduced listing times for the highest priced houses as bidders worried about losing out act faster than they have in the past two years, according to Stephen Shapiro, co-founder of Westside Estate Agency in Beverly Hills.

While luxury properties used to linger on the market for weeks and months as recently as 2011, offers now come in on the day of the first showing, a phenomenon that was common during the 2007 buying frenzy, Mr Shapiro said.

“In recent history, buyers would look at homes and return six months later to find the same home was still on the market," he said. “Now if buyers hesitate, the house is often sold by the time they come back. And each time one sells, the next one comes on at a higher price."

Sales remain less than the record reached from 2005 to 2007, said Mr Leibovitch of Rodeo Realty. In Beverly Hills, where celebrities including
Sharon Stone
have homes, first-quarter transactions for properties priced $US2 million and higher were 40 per cent below the 65 homes sold in the third quarter of 2005, and in Brentwood the 25 purchased were 49 per cent below 2007’s second quarter, according to DataQuick.

Deals are being held back in part by a shortage of willing sellers. Nationwide, about 2.37 million existing homes were listed for sale in March, the fewest since 2005, the year US home sales reached a record 7.08 million, the National Association of Realtors reported on April 19.

“We could have twice as many sales if we had more inventory," Mr Leibovitch said.

A total of 19,284 houses and condominiums sold in Los Angeles and five other southern California counties in April, DataQuick reported. That was down 3.4 per cent from March, and 21 per cent below the average for April since 1988.

Jack Massopust listed his 92-year-old father’s Brentwood home, which boasts views of the city, the Pacific Ocean and Catalina Island, on April 3 for $US1.55 million. Within about a week, more than 100 people had attended three open houses, and the 3200 square foot (300 square meter) house, which Mr Massopust’s father bought new in 1960, had received 11 offers. Eight were at or above the asking price.

The sale of the property, listed through Mary Lu Tuthill of Coldwell Banker Previews International in Brentwood, is expected to close shortly for about $US1.705 million. The purchasers agreed to a “buy as is" condition, Mr Massopust said.

“I have always appreciated the location and the view," said Mr Massopust, 64, a retired transportation engineer for the city of Los Angeles. “That’s in my opinion what sold the house for that price. But I was still very surprised."

Sales volume for homes priced at $US5 million and higher at all of Coldwell Banker’s West Los Angeles offices was up 35 per cent this year through to May 8 from a year earlier, according to Joyce Rey, the Beverly Hills-based head of the estates ­division at Coldwell Banker.

“There’s an added degree of confidence in the future and that prices are likely going to go up," Ms Rey said. “There is a definite change in ­consumer attitude."

Ms Tuthill, who also brokered the sale of Christine Lynch’s house, said an increasing number of homes sell within a week of being listed. One 6000 square foot property on Tower Road in Beverly Hills scheduled to close by the end of the month, came on the market at $US7.30 million and within a week received five offers, the highest more than $US2 million greater than the asking price, Ms Tuthill said.

The increase in demand for high-end properties is being driven in part by investors looking to make a profit, a buyer pool that’s been almost non-existent for the past couple of years, according to Ms Rey. She said investors have grown to about 20 per cent of the buyers she represents since the beginning of the year.

Throughout southern California, the portion of investor purchases was close to a record last month, and the share of buyers paying cash was double the historical average, according to DataQuick.

“The speculative buyer is back," Ms Rey said. “This is the first time since 2007 that I have investor clients again." That was buoying an increase in bids for homes that need major work, she said.

One house on a 25,000 square foot lot in Brentwood hadn’t been on the market in more than 50 years and was considered a borderline knockdown, according to Ms Tuthill. The home, with original 1930s kitchen and bathrooms, was listed at $US5.50 million at the beginning of March and received five offers, the highest $US5.6 million. After the seller countered at $US5.695 million, two bidders upped their offers to $US5.7 million and one jumped to $US5.75 million, the eventual selling price.

“We were always joking that we were holding it together with bubble gum and paper clips," Ms Tuthill said. “The initial reaction was that this property was priced too high. But what brokers underestimated is the pent-up demand."

A home on Bel Air Road in Bel Air came on the market in mid-March at $US10.25 million and the final purchase agreement was signed for $US1 million more.

The mid-century house, once owned by the late television host Art Linkletter, hadn’t been on the market in 40 years. The buyer is considering a major renovation or tearing it down, Ms Tuthill said.

“Those types of properties are more in demand than ever," said Mr Leibovitch of Rodeo Realty. “With interest rates as low as they are, investors can really get a good deal."

Competition is so fierce that one couple looking to buy in Santa Monica had their daughters, aged eight and 10, write a letter and draw a picture of the home to try to persuade the elderly seller to choose them over other bidders.

The neurologist and his wife, who asked not to be named, agreed in mid-April to pay $US155,000 more than the $US2.70 million asking price for the four-bedroom, three-bathroom house two blocks from the beach.